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Archive for Tuesday, October 3, 2006

Gas price drop no conspiracy

October 3, 2006

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Americans love conspiracy theories. If they can't find a good one to get jazzed about, they'll eagerly embrace a bad one.

The conspiracy nuts are loose again, just in time for the fall elections. This time they're falling for a wildly illogical theory with no basis in reality.

Some of the same folks who believed that evil, omniscient forces were conspiring to send energy prices skyrocketing a year ago are now experiencing angst about sharply "falling" crude oil and gasoline prices.

It's tough to please these folks.

During the past month, retail gas prices have tumbled 50 cents, or 17 percent, to a nationwide average of $2.38 a gallon, according to the U.S. Department of Energy. That's got the conspiracy theorists all a-twitter.

A Gallup poll found that 42 percent of respondents agreed with the statement that the Bush administration "deliberately manipulated the price of gasoline so that it would decrease before this fall's elections." Fifty-three percent disagreed, and 5 percent were uncertain.

The conspiracy postulate I've been hearing is that the Bush administration, or Big Oil, or the two in combination, are conniving to send gas prices plunging prior to the coming elections so that Americans will be happier and less inclined to throw out Republican incumbents (e.g., GOP lawmakers who control Congress).

I'm not fond of the Bush administration. I don't like its tax policies that excessively favor the rich, its wasteful spending, its horrendously bungled foreign policy (think Iraq), its record budget deficits, its reluctance to raise the minimum wage, its resoundingly rejected Social Security privatization scheme or its shortsighted opposition to a substantial increase in fuel economy standards for passenger vehicles.

But I'm not so wildly biased against George W. Bush and his cronies as to think that they and their Big Oil compadres can simply snap their fingers and manipulate energy prices up or down. (Nor do I believe the ultra-goofy, left-wing conspiracy theory that the Bush administration helped perpetrate the 9-11 terrorist attacks).

If Big Oil can rig gasoline prices at will, why on earth were pump prices low for most of 1986-2000? And why did so many energy companies achieve only modest profits during such an extended period? I'm awaiting your answer, conspiracy theorists.

As for the current situation, there are valid, non-conspiratorial reasons why oil and gasoline prices have dropped sharply since peaking above $78 a barrel for oil and $3 a gallon for gasoline.

Gas prices have dropped in part because demand is down. The summer driving season is over. The economy is slowing. More Americans are buying smaller, more fuel-efficient cars. U.S. gasoline consumption fell 4.1 percent in the two weeks that ended Sept. 15.

In addition, the "fear factor" that was inflating energy prices, particularly on the volatile futures markets, has dissipated.

Fears of another nightmarish hurricane season disrupting energy supplies have subsided. Concerns about oil supply curtailments from Iran and Nigeria have decreased. A potentially huge oil find in the Gulf of Mexico has heightened optimism for long-term supplies.

Oil giants such as ExxonMobil, Chevron and BP are powerful companies that can throw their weight around. But they can't control energy prices at will.

As a Fort Worth Star-Telegram business writer covering the petroleum industry, I saw oil prices plunge below $10 a barrel in 1986, much to the horror of top U.S. energy executives and the supposedly all-powerful Organization of Petroleum Exporting Countries. Various members of that oil cartel began cheating on production quotas in a frantic effort to reap more revenues. But that gambit flooded the market with excess oil and sent prices lower.

Energy prices are most greatly influenced by the global forces of supply and demand. Conspiracy theorists don't like hearing that because it's pretty dull stuff. It's more fun to complain that falling gas prices are the illegitimate child of a political conspiracy geared to produce favorable election results.

I hope I haven't spoiled anyone's fun by injecting common sense into the debate.

- Jack Z. Smith is an editorial writer for the Fort Worth Star-Telegram. His e-mail address is jzsmith@star-telegram.com.

Comments

Curious 7 years, 6 months ago

No one refutes his argument? Surely there are some conspiracy believers in the crowd.

Have to wait for another day, I guess.

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jhawkrawk 7 years, 6 months ago

It's sure good to save money! Check out today's gas prices at www.kansasgasprices.com

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